The asset manager uses climate data to assess risk and drive value creation across thousands of investments
In 2024, Ares launched the Ares Climate Transition (ACT) Program, a data-driven emissions measurement and decarbonization initiative that aims to drive value by engaging a wide range of portfolio companies in their emissions monitoring and reduction goals. By partnering with Watershed, Ares expanded carbon footprint coverage from 35% to 82% of their 2023 portfolio to support the launch of the ACT Program and help prioritize engagements.
Challenge
Given its global presence and diverse strategies, Ares faced significant complexity in measuring and managing emissions across its portfolio. Its initial manual, spreadsheet-based processes only covered a portion of its portfolio and proved challenging for complex calculations and meeting growing demands for emissions data.
Solution
After a rigorous evaluation, Ares selected Watershed for its combined software and advisory approach, focusing on building a streamlined process for gathering and understanding data at the source. With Watershed, they standardized data collection across systems and established a reliable and efficient system to record emissions data.
Results
Challenge
Ares Management is a large alternative investment manager with over $460B in assets under management across the globe as of September 30, 2024. Their large and diverse portfolio comprises over 3,000 companies and is growing quickly. "The scale and diversity of our global portfolio—spanning thousands of companies and dozens of investment types across the world—creates significant complexity in sustainability measurement,” explains Joe Indvik, the Climate Strategy Lead on Ares’ ESG Team.
Indvik and his team integrate ESG practices throughout the firm's operations and across their investment platform. Their objective is to embed sustainability at throughout the portfolio management lifecycle—from initial due diligence through value creation and ultimately to exit. Overseeing climate work in those areas, Indvik works to develop climate programs across Ares’ various investment asset classes, including measuring emissions, decarbonization, and climate strategy and risk management.
“For us, measuring and reporting on emissions is not just useful for compliance and reporting, but also for finding value creation opportunities. We use data in meaningful ways to find the best levers for decarbonization.”
Joe Indvik,
Climate Strategy Lead
Indvik recognized that an effective climate strategy requires solid data foundations. Initially, Ares' climate program relied on manual spreadsheets to track their diverse portfolio—a method that proved to be inefficient and unwieldy, only covering 35% of their assets.
As the program expanded, these basic tools couldn't handle the complex emissions calculations or provide the standardized data needed for their growing portfolio. The team needed a robust platform that could deliver three key capabilities: accurate emissions measurement, comprehensive reporting for investors and other stakeholders, and strategic insights to drive decision-making. The right solution would allow them to align their climate initiatives with investment strategy while meeting increasing demands for emissions data from the market while acting as a centralized, standardized place for climate data.
Solution
To select a platform, Ares conducted a rigorous RFP process, ultimately landing on Watershed because of several key differentiators. With its combined software and advisory approach, Watershed stood apart because of its in-house team of climate experts. Watershed also provides strong estimation capabilities and integration flexibility for complex data systems, enabling Ares’ intricate workflows to be built within the platform. As self-described “power users,” Ares needed a platform with transparency around underlying calculations—something Watershed provided. Watershed struck the balance: sophisticated enough to handle Ares' complex portfolio while offering a streamlined, intuitive experience for both teams and stakeholders.
Throughout their evaluation process, the Ares team focused especially on the quality of their data at the source: “No amount of automation can solve for poor or poorly understood data at the source,” Indvik explains. “It’s not just about plugging data into the software, it’s about building a streamlined process to systematically gather, understand, and identify gaps in the data, and we knew Watershed would help us do that.”
To implement Watershed, the Ares team first standardized data collection across multiple systems and partnered with Watershed to develop methodologies for various investment types. With Watershed in place, they had an established system to record emissions data that was reliable, auditable, and efficient—enabling them to better understand their portfolio and take action.
“We came for the product and stayed for the people. The team really got to know our portfolio and didn't just sell us a fixed solution— they showed us how Watershed could integrate with our data and business for the long run.”
Joe Indvik,
Climate Strategy Lead
Results
With Watershed, Ares has dramatically expanded its emissions visibility, increasing portfolio coverage from 35% to 82%—a 134% improvement. This expanded view has enabled the creation of emissions profiles across diverse investment types, providing unprecedented insight into their complex portfolio. Beyond just measurement, the team has established a foundation for third-party verification and streamlined its investor reporting processes.
This enhanced data infrastructure has proven transformative, supporting the launch of the Ares Climate Transition (ACT) program. Watershed serves as Ares' “central source for climate data,” centralizing not only emissions data but also crucial survey responses and climate-related KPIs. This comprehensive view allows the team to assess where companies stand in their decarbonization journey and make strategic decisions about engagement priorities.
The Ares team has developed a sophisticated engagement strategy that cross-references two critical metrics: emissions intensity and climate maturity. This analytical approach helps identify companies where intervention will have the highest impact—particularly those combining high emissions intensity with low climate maturity.
“Watershed provides us with a single source of truth for our climate data and analytics, helping us better identify and prioritize strategic opportunities across our portfolio. It gives us confidence that we're investing our efforts where they matter most.”
Joe Indvik,
Climate Strategy Lead
With reliable data backing them, Indvik and the Ares team are excited to scale the ACT program implementation across their portfolio, expanding emissions coverage and data gathering even further.
Through its partnership with Watershed, Ares has centralized and streamlined its data collection across financial, operational, and emissions metrics—creating a foundation for more effective climate action. With this enhanced visibility, Indvik and the Ares ESG team can now identify portfolio 'hotspots' and implement targeted, value-creating engagement opportunities. “Our more precise understanding of portfolio emissions is unlocking decision-useful insights that drive our climate strategy,” explains Indvik. “This data-driven approach won't just support portfolio companies in their decarbonization journey—it will help us better understand our own risks and opportunities across the portfolio.”
“Globally, we're entering the ‘rubber hits the road’ phase of decarbonization. With companies representing 39% of the global market cap now committed to Science-Based Targets, the focus is shifting from setting goals to achieving them. Success depends on having reliable data to identify opportunities, measure progress, and demonstrate value to stakeholders—that's where Watershed comes in.”
Joe Indvik,
Climate Strategy Lead
See Ares’ latest TCFD-aligned Climate Action Report on their ESG page for more information on emissions results and climate initiatives across the firm.
